02142cam a22002897 4500001000700000003000500007005001700012008004100029100002200070245010800092260006600200490004200266500001400308520082800322530006101150538007201211538003601283690011701319690005701436690008801493690005701581700002001638710004201658830007701700856003801777856003701815w13092NBER20150303163539.0150303s2007 mau||||fs|||| 000 0 eng d1 aLorenzoni, Guido.10aFinancial Frictions, Investment and Tobin's qh[electronic resource] /cGuido Lorenzoni, Karl Walentin. aCambridge, Mass.bNational Bureau of Economic Researchc2007.1 aNBER working paper seriesvno. w13092 aMay 2007.3 aWe develop a model of investment with financial constraints and use it to investigate the relation between investment and Tobin's q. A firm is financed partly by insiders, who control its assets, and partly by outside investors. When their wealth is scarce, insiders earn a rate of return higher than the market rate of return, i.e., they receive a quasi-rent on invested capital. This rent is priced into the value of the firm, so Tobin's q is driven by two forces: changes in the value of invested capital, and changes in the value of the insiders' future rents per unit of capital. This weakens the correlation between q and investment, relative to the frictionless benchmark. We present a calibrated version of the model, which, due to this effect, generates realistic correlations between investment, q, and cash flow. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web. 7aE22 - Investment • Capital • Intangible Capital • Capacity2Journal of Economic Literature class. 7aE30 - General2Journal of Economic Literature class. 7aE44 - Financial Markets and the Macroeconomy2Journal of Economic Literature class. 7aG30 - General2Journal of Economic Literature class.1 aWalentin, Karl.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w13092.4 uhttp://www.nber.org/papers/w1309241uhttp://dx.doi.org/10.3386/w13092